While a wrongful death settlement can’t bring loved ones back, it can help you deal with funeral expenses, lost household income, and the mental anguish that comes with losing a close relative. Whether you’ve already contacted a lawyer or are doing initial research into your legal options, you may be wondering, “Are wrongful death settlements taxable?”
Charlotte’s experienced wrongful death lawyer at Yale Haymond Law PLLC can help you determine the value of your claim, negotiate on your behalf for a fair settlement, and answer other common questions about wrongful death settlements.
How Are Wrongful Death Settlements Calculated?
When you file a wrongful death lawsuit, you are seeking compensation for your losses, known legally as personal injury damages. You may recover this compensation either as a judgment in court or as part of an out-of-court settlement agreement with the other party.
Your verdict or settlement amount may include the following types of damages:
- Medical costs of treating your loved one before their death
- Pain and suffering your loved one experienced
- Reasonable funeral and burial expenses
- Loss of your family member’s potential future income
- Loss of companionship, emotional support, income, and practical assistance your loved one may have provided to the family
- The mental anguish caused by losing a close family member
- Loss of inheritance
Any damages awarded in a wrongful death claim will go to the victim’s heirs in the following order:
- Surviving spouse
- Children
- Grandchildren
- Parents
- Siblings
How Are Wrongful Death Settlements Taxed?
Now we answer our primary question: are wrongful death settlements taxable? Not usually. Because the Internal Revenue Service (IRS) does not consider wrongful death settlements a type of income, it does not typically tax them. The same is true based on state tax laws in North Carolina.
Both the federal and state governments recognize that such settlements are compensation for personal injuries and that taxing them would place more financial pressure on families already suffering the loss of a loved one.
Are There Any Tax Exceptions?
The IRS may tax or deduct certain portions of your wrongful death settlement, such as in the following circumstances:
- If you previously received part of your settlement for the medical expenses of your deceased loved one, the IRS might subtract it from your final settlement amount.
- If the IRS determines that the emotional distress for which you collected compensation was not due to a personal injury or illness, you may have to pay taxes on some of your wrongful death settlement.
- If a court awards punitive damages — damages intended to punish the defendant rather than to compensate you for your injuries — you typically have to pay taxes on this amount.
Tax laws are complex and change frequently. A tax professional or experienced wrongful death attorney can evaluate your circumstances and provide advice about whether you may have to pay taxes on any portion of your settlement.
What Are Common Types of Wrongful Death Claims?
Wrongful death lawsuits come about after all kinds of fatal accidents caused by someone else’s negligence, including the following:
- Car, truck, and motorcycle crashes, including drunk driving and distracted driving cases
- Bicycle collisions
- Pedestrian accidents
- Defective products, including equipment, vehicles, and prescription drugs
- Medical malpractice, including misdiagnosis, surgical mistakes, medication errors, or failure to properly monitor a patient’s condition
When choosing a lawyer, look for firms with experience with cases similar to yours. If your loved one died in an accident with a commercial truck, look for a truck accident attorney in Charlotte, NC.
What Do Wrongful Death Claims Have To Prove?
If you lose a loved one in a motor vehicle collision, an accident on someone else’s property, or during a medical procedure, you may qualify to file a wrongful death claim. In short, wrongful death cases arise when someone’s negligence, carelessness, or recklessness leads to someone else’s death.
Successful wrongful death lawsuits in North Carolina must typically prove the following:
- The liable party (the defendant) owed a duty of care to your family member
- The defendant’s action (or lack of action) constituted a breach of duty
- That breach of duty caused or contributed to the fatal accident
- The death of your loved one caused tangible (calculable) damages
Contact an Experienced Wrongful Death Attorney Today
Now you know the answer to the question, “Are wrongful death settlements taxable?” If you’d like to learn more about filing a wrongful death or personal injury case, contact Yale Haymond Law PLLC. Call 704-800-HELP (4357) or schedule a free consultation online with an experienced premises liability lawyer in Charlotte, NC, today.
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